$840,000 Bar Tab

A well-connected, politically active liquor hauler is apparently on the lam.

Nobody knows the things Russell Lee LaFountaine knows. Like, where he is. Is the party-hardy Indian/ gay/Democratic activist hiding out or just unaware that local and federal authorities want him for the biggest fraud ever investigated by the state auditor?

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Similarly, did LaFountaine, a contract hauler for the state Liquor Control Board (although the board can't find his contract), rip off $840,000 in fraudulent booze deliveries and billings from the clueless board—or just do a real bad job counting the drinks?

And only LaFountaine knows for sure if he blew some of the ill-gotten thousands on lavish parties around town and at his rental apartment on Lake Washington—and whether LaFountaine, a dues-paying supporter of Mayor Greg Nickels, supplied Nickels with $300 in stolen booze for a campaign fund-raising bash at Safeco Field last year.

Nickels' press spokesperson Marianne Bichsel says, "Yes, we know him. Yes, he's a contributor." The felony suspect is still listed on Nickels' 2001 campaign Web site as one of his top endorsers (along with, among others, state auditor Brian Sonntag, who recently investigated LaFountaine's alleged fraud). Besides the liquor donation at an August 2001 party in a Safeco luxury suite, LaFountaine gave Nickels' campaign $300 in cash.

But as Bichsel notes, there was no way to know then that LaFountaine's political donations might have been at taxpayer expense. He was just a Nickels groupie, not a man on the run.

THAT ALL CHANGED in April, says Lt. Grant Hulteen, a Washington State Patrol investigator. Armed with a warrant for alleged fraud, state and local officers raided LaFountaine's waterfront residence in the 11200 block of Rainier Avenue South. But the chunky, boyish-looking LaFountaine, 34, had packed up and vanished. "He was tipped we were coming," says Hulteen. Thus began a six-month manhunt that includes the U.S. Marshals Service. "We're still trying to find him," says Thurston County Prosecutor Ed Holm, and he's hoping for a break. LaFountaine is charged in Thurston County with defrauding the state, and a wanted poster has been issued nationally. State officials would dearly like to see him in cuffs. If Nickels is mildly embarrassed, down in Olympia they're beet red with shame.

"His contract?" says Gigi Zenk of the state liquor board. "No, we can't find anything like that. We're extremely disappointed. We're a victim of a crime, and we can't find any paperwork on him"—including why or how he was hired.

LaFountaine did have some prior long-distance driving experience: As a leader of Native Vote '96, he piloted a 30-foot motor home across the U.S. to the Democratic convention in 1996, campaigning at reservations and casinos to turn out the Native American vote. A Puyallup Indian who became active in gay and Democratic political causes, LaFountaine was also campaign manager for Initiative 651, a failed multitribal effort to expand Indian gambling in Washington.

A female acquaintance told investigators that the self-promoting LaFountaine "loves to name-drop who he is friends with. At some of his parties, I met judges, mayors, ex-governors, lawyers, councilmen and -women." She didn't provide names.

As a contract liquor hauler from 1997 until this year, LaFountaine delivered perhaps millions of dollars worth of wine and booze from the liquor board warehouse in Seattle to state stores along the thirsty Interstate 5 corridor. One of more than a dozen state liquor- freight carriers who drove their own or rented trucks, LaFountaine began padding costs and double billing the state for deliveries three years ago, according to a recent state audit. He also issued dummy vouchers for what officials say was his dummy business, LaFountaine Co.

In a 32-month period from July 1999 to February of this year, the audit found, LaFountaine billed the board for 1,370 phantom deliveries, a loss of $600,000. He also inflated costs by adding 5,000 pounds to each of 600 liquor shipments and double billed for 273 deliveries.

THE $840,000 LOSS could be an understatement, because the audit did not review prior years' deliveries. The board says the "loophole" in its accounting system opened up with billing changes in 1999, causing a critical breakdown in oversight. Vendors are supposed to be paid after deliveries are verified by invoice and weight. LaFountaine was able to defraud the board, says auditor Sonntag, because billings weren't being reconciled with actual deliveries. In effect, the drinks were on the taxpayers.

Board spokesperson Zenk says an audit shows no other drivers made fraudulent billings. "Why wasn't [LaFountaine] caught [in the act]? That's a good question," says Zenk, who is also at a loss to explain why board files contain no contract after more than five years of contract work. "Our controls were not as good as they should have been," she says in a ringing understatement. That should all change now, she adds. "We have had a new management team in place since January."

Still, "How in the world did someone get away with such a massive fraud?" asks Marsha Richards of the taxpayer-watchdog Evergreen Freedom Foundation. Reconciling liquor transfers ought to be the most elemental function of oversight. "The liquor board," she says, "is obviously in need of a serious housecleaning."

LaFountaine may also have had inside help from a board employee—who ultimately turned him in, officials say. According to investigative and court documents, board fiscal analyst Gerianne Silva, who attended some of LaFountaine's parties, says she received $10,000 from her "social friend." She admits to handing out checks to LaFountaine in a parking lot outside board headquarters and concedes she was aware of his questionable billings.

Silva, who was fired by the board but has not been charged with a crime, says she decided to expose LaFountaine in March after she discovered the breathtaking extent of the fraud. LaFountaine was supposed to be making around $12,000 monthly, the state says, but was raking in over five times that.

The board paid LaFountaine $685,000 last year, some of which, officials say, was spent on Seattle parties that occasionally featured valet parking, a steady flow of booze, and up to 300 guests. LaFountaine leased an 80-foot yacht, wore expensive jewelry, and presented himself to sports and politi- cal figures as a high roller. But then, he was rich. "The state paid him a lot of money for doing nothing," says prosecutor Wheeler.

One thing: In all that time, the audit discovered, LaFountaine didn't bill the state for 380 loads of booze, worth almost $68,000, that he legitimately delivered.

"I guess he didn't need it," says Wheeler, "he was making so much money the other way."